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DEBT INSTRUMENTS
• It is a paper or electronic obligation
• Enables the issuing party to raise funds
• It is of two types
1. Long-term instruments
2. Short-term instruments
Example:
Bonds, Certificates of Deposit, Commercial Papers, G – Secs (Government
Securities), Treasury Bills.
Bonds.
Certificates
of Deposit.
Commercial
Papers.
G – Secs
(Governmen
t Securities)
Treasury
Bills
 Treasury Bills are short term (up to one year) borrowing
instruments of the Government of India which enable investors to
park their short term surplus funds while reducing their market risk.
 They are auctioned by
Reserve Bank of India at
regular intervals and issued
at a discount to face value.
Ad hoc
Treasury
bills
Regular
Treasury
bills
Ad hoc Treasury bills
Ad hoc treasury bills are issued for providing investment outlets to state governments,
semi-government departments and foreign central banks for their temporary surpluses.
They are not sold to the general public (or banks) and are not marketable.
 Government could maintain with the Reserve bank a cash balance of not less than Rs 50
crore on Fridays and Rs 4 crore on other days,
 free of obligations to pay interest,
Ordinary T-bills:-
Ordinary T-bills are issued to the public and the RBI for enabling the government to meet
the needs of supplementary short term finance.
Current status
At present the government of India issues three types of treasury bills
trough auctions namely 91 day , 182 day and 364 day .
There are no treasury bills issued by state Government.
T-bills are available for a minimum amount Rs. 25000 and in multiple Rs.
25000. T-bills are issued at a discount and are redeemed at par
91 days treasury bills
• Issued at fixed discount rate of 4% and sold through auctions.
•Rediscounted at any time after 14 days of their Purchase
•RBI holds 91 days TB’s and are issued on tap basis Throughout the week.
• Sold through auction conducted once in fortnight. At a denomination of RS. 500 and auction
is held every Wednesday
182 day’s treasury bills
•No fixed discount rate.
• Discount rate are quoted in auction by the participants and accepted by the authorities and
the rate is called Cut Off Rate.
Sold through auction conducted once in fortnight. At a denomination of RS. 500 and auction is
held every Wednesday
Individuals, Firms, Trusts, Institutions and banks can purchase T-Bills. The
commercial and cooperative banks use T-Bills for fulfilling their SLR requirements.
Who can purchase T-Bills?
FORM
The T-bills are issued in the form of Promising note in Physical Form or by credit
Subsidiary General Ledger (SGL) account or Gill account in dematerialized form.
364 days treasury bills
Sold through auction conducted once in fortnight. At a denomination of RS. 1000 and
auction is held every alternate Wednesday
AUCTION
T-bills are auctioned every alternative
week of Wednesday.
The RBI issues quarterly calendar of
T-bills auction which is available at
the banks website.
All T-bills are now sold through an
auction process according to a fixed
auction calendar, announced by RBI.
Operation
The date of auction and the last date of submission of tenders are notified by the RBI through a
press release.
•The next working day : the date of auction ,the accepted bids with the prices are displayed.
•The successful bidders have to collect letters of acceptance from the RBI and deposit the
same along with a cheque within 24 hours of the announcement of auction results.
•Investors maintain a Subsidiary General Ledger(SGL) account with the RBI. Purchases and the
sales of TBs are recorded in this account and investors who do not have SGL account can do it
through DFHI.
•It also gives buy-back and sell- back facilities for periods up to 14 days at an agreed rate of
interest to investors.
YIELD CALCULATION
The yield of a T-Bill is calculated as per the following formula:-
Y=((100-Price)*365)/( Price * D )
Y:-Discounted Yield
P:-Price
D:-Days of maturity
Participants
I RBI and SEBI
II. Commercial banks
III. State governments
IV.DFHI
V. Financial institutions like LIC , GIC, UTI, IDBI, ICICI, IFCI, NABRD
VI. Corporate customers
VII. Public
MERITS :
1. Safety
2. Liquidity
3. Ideal short term investment
4. Ideal fund management
5. Statutory liquidity requirement
6. Source of short term funds
Demerits:
1. Absence of competitive bids
2. Absence of active trading
Treasury bills

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Treasury bills

  • 1.
  • 2. DEBT INSTRUMENTS • It is a paper or electronic obligation • Enables the issuing party to raise funds • It is of two types 1. Long-term instruments 2. Short-term instruments Example: Bonds, Certificates of Deposit, Commercial Papers, G – Secs (Government Securities), Treasury Bills.
  • 3. Bonds. Certificates of Deposit. Commercial Papers. G – Secs (Governmen t Securities) Treasury Bills
  • 4.  Treasury Bills are short term (up to one year) borrowing instruments of the Government of India which enable investors to park their short term surplus funds while reducing their market risk.  They are auctioned by Reserve Bank of India at regular intervals and issued at a discount to face value.
  • 6. Ad hoc Treasury bills Ad hoc treasury bills are issued for providing investment outlets to state governments, semi-government departments and foreign central banks for their temporary surpluses. They are not sold to the general public (or banks) and are not marketable.  Government could maintain with the Reserve bank a cash balance of not less than Rs 50 crore on Fridays and Rs 4 crore on other days,  free of obligations to pay interest, Ordinary T-bills:- Ordinary T-bills are issued to the public and the RBI for enabling the government to meet the needs of supplementary short term finance.
  • 7. Current status At present the government of India issues three types of treasury bills trough auctions namely 91 day , 182 day and 364 day . There are no treasury bills issued by state Government. T-bills are available for a minimum amount Rs. 25000 and in multiple Rs. 25000. T-bills are issued at a discount and are redeemed at par
  • 8. 91 days treasury bills • Issued at fixed discount rate of 4% and sold through auctions. •Rediscounted at any time after 14 days of their Purchase •RBI holds 91 days TB’s and are issued on tap basis Throughout the week. • Sold through auction conducted once in fortnight. At a denomination of RS. 500 and auction is held every Wednesday 182 day’s treasury bills •No fixed discount rate. • Discount rate are quoted in auction by the participants and accepted by the authorities and the rate is called Cut Off Rate. Sold through auction conducted once in fortnight. At a denomination of RS. 500 and auction is held every Wednesday
  • 9. Individuals, Firms, Trusts, Institutions and banks can purchase T-Bills. The commercial and cooperative banks use T-Bills for fulfilling their SLR requirements. Who can purchase T-Bills? FORM The T-bills are issued in the form of Promising note in Physical Form or by credit Subsidiary General Ledger (SGL) account or Gill account in dematerialized form. 364 days treasury bills Sold through auction conducted once in fortnight. At a denomination of RS. 1000 and auction is held every alternate Wednesday
  • 10. AUCTION T-bills are auctioned every alternative week of Wednesday. The RBI issues quarterly calendar of T-bills auction which is available at the banks website. All T-bills are now sold through an auction process according to a fixed auction calendar, announced by RBI.
  • 11. Operation The date of auction and the last date of submission of tenders are notified by the RBI through a press release. •The next working day : the date of auction ,the accepted bids with the prices are displayed. •The successful bidders have to collect letters of acceptance from the RBI and deposit the same along with a cheque within 24 hours of the announcement of auction results. •Investors maintain a Subsidiary General Ledger(SGL) account with the RBI. Purchases and the sales of TBs are recorded in this account and investors who do not have SGL account can do it through DFHI. •It also gives buy-back and sell- back facilities for periods up to 14 days at an agreed rate of interest to investors.
  • 12. YIELD CALCULATION The yield of a T-Bill is calculated as per the following formula:- Y=((100-Price)*365)/( Price * D ) Y:-Discounted Yield P:-Price D:-Days of maturity
  • 13. Participants I RBI and SEBI II. Commercial banks III. State governments IV.DFHI V. Financial institutions like LIC , GIC, UTI, IDBI, ICICI, IFCI, NABRD VI. Corporate customers VII. Public
  • 14. MERITS : 1. Safety 2. Liquidity 3. Ideal short term investment 4. Ideal fund management 5. Statutory liquidity requirement 6. Source of short term funds Demerits: 1. Absence of competitive bids 2. Absence of active trading